Tax Policy Changes Research Articles

The Timing of Income Tax Changes in the Face of Projected Debt Increases

AbstractThis article examines the time path of the income tax rate chosen by a hypothetical policy‐maker, in a model where an increasing ratio of government debt to GDP is projected in the absence of policy changes. The policy‐maker is assumed to maximise an objective function expressed in terms of a number of aggregate variables, including the excess burden of taxation and a desired debt ratio. Tax policy changes have feedback effects, as a result of incentives and other endogenous influences that impose constraints on the efficacy of those policies. Emphasis is given to the importance of uncertainty in devising an optimal policy and the consequent value of waiting instead of imposing a sharp initial increase in anticipation of otherwise higher future debt.

Effects of Taxes and Safety Net Pensions on Life-Cycle Labor Supply, Savings and Human Capital: The Case of Australia

In this paper we structurally estimate a life-cycle model of consumption/savings, labor supply and retirement, using data from the Australian HILDA panel. We use the model to evaluate effects of the Australian aged pension system and tax policy on labor supply, consumption and retirement decisions. Our model accounts for human capital accumulation via learning by doing, as well as wealth accumulation and decumulation over the life cycle, uninsurable wage risk, credit constraints, a non-absorbing retirement decision, and labor market frictions. We account for the “bunching” of hours by discretizing job offers into several hours levels, allowing us to investigate labor supply on both intensive and extensive margins. Our model allows us to quantify the effects of anticipated and unanticipated tax and pension policy changes at different points of the life cycle. Our results imply that the Australian Aged Pension system as currently designed is very poorly targeted, so that means testing and other program rules could be improved.

The effect of estate tax change on the controlling shareholding structure and corporate value of family firms

AbstractManuscript typeEmpiricalResearch question/issueEstate tax planning has always been a primary concern of large shareholders when arranging the controlling shareholding structure of family firms. This paper provides evidence on the effect of a drastic change in estate tax on the shareholding structure of family‐controlled firms in Taiwan, as well as the impact of these changes on the firms' corporate value. We examine a 2008 policy change in Taiwan that substantially reduced the estate tax from a maximum rate of 50% to a single tax rate of 10%.Research findings/insightsWe analyze a 12‐year period from 2002 to 2014 looking at data of family‐controlled, listed companies with IPOs prior to 2001. The empirical results reveal a reduced motivation among controlling families to circumvent estate tax through altering the shareholding structure after the law change. The results also reveal a positive impact on firm value as a result of the reduction in the tax burden of controlling families. These findings contribute to the family firm and tax literature and provide insight into the effects of tax policy change on the controlling structure of family firms and the consequent benefits on firm value.Theoretical/academic implicationsTo the best of our knowledge, this paper is the first empirical study that establishes a significant relationship between estate tax and tax‐avoidance behaviors reflected in the change of the shareholding structure of a family firm. Many research topics linking estate tax with other corporate governance issues in family firms are here unexplored.Practitioner/policy implicationsFor the policymaker, this study highlights the increase of firm value due to a reduction in the estate tax rate. Moreover, a tax‐friendly environment can help the controlling family commit themselves to the proper management of the firm instead of expending effort on tax minimization to safeguard their wealth.

Aiming to keep poor Mexican families at the breadline (but no higher): The effects of minimum wage, tax, and social policy changes between 1994 and 2012

AbstractWelfare policy in Mexico has been transformed in recent decades. During the years of the import‐substitution industrialization economic strategy and the hegemonic party political regime, social policy was based on social insurance programs of limited coverage to urban formal sector workers and their families. In the mid‐1990s, an unprecedented expansion of social protection through social assistance programs was triggered, along with social insurance reform. This article assesses the effects at the household level of social policy changes, in combination with changes in taxes and the minimum wage, which also impact the welfare of the population. The research applies “model families” to establish effects of social, tax, and minimum wage policy changes across population groups, and their combined potential to combat poverty. Findings show that although taxation and social policy changes increased redistribution towards poor families, their capacity to lift and keep them above poverty thresholds was limited by the drop in the real value of the minimum wage and by strict targeting mechanisms, which exclude families that do not meet eligibility criteria but still fall below poverty lines. Social policy expansion merely subsidized the drop in real minimum wage, and poor families at best remained at similar income levels. Hence, the logic of the design of welfare policy changes can be characterized as aiming to keep poor families on the breadline, but no higher.

Who Bears the Corporate Tax Incidence? Empirical Evidence from India

Against the backdrop of corporate tax policy changes in India, the paper attempts to measure the incidence of corporate income tax in India under a general equilibrium setting. Using seemingly unrelated regression coefficients and dynamic panel estimates, we tried to analyze both the relative burden of corporate tax borne by capital and labor and the efficiency effects of corporate income tax. The data for the study is compiled from corporate firms listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE) for the period 2000–15. Our empirical estimates suggest that in India capital bears more of the burden of corporate taxes than labor. However, the results vary with different proxies of capital used in the models. Though it is contrary to the Harberger (1962) hypothesis that the burden of corporate tax is shifted to labor rather than capital, it confirms the existing empirical results in the context of India.

Income Tax Reforms and Redistribution by Age Group: Evidence From Japan

In the 1980s, tax policy changes mitigated the redistributive effect of income tax. The present study attempts to explore how different the redistributive effect of the income tax reforms in Japan is among age groups, using Japanese household microdata for the period 1984–2009. The following results are obtained. First, the overall redistributive effect was greatest for the elderly group, followed by the middle-aged group, and then the young group. Furthermore, this trend increased steadily over time. Second, the difference in total redistributive effects between the young and elderly increased owing to a large reduction in the base effect for the young.

To What Extent Changing Tax Policy and External Financing Influence the Risk Level of Viet Nam Banking Industry during and after the Global Crisis

Over past few years, the global financial crisis shows certain influence on emerging financial markets including Viet nam. Therefore, this study chooses an analytical approach to give some systematic opinions on how much some certain determinants such as income tax and leverage, affect the level of market risk in listed medicine companies. First, it calculates equity and asset beta values in three (3) different scenarios of changing tax rates and changing the level of financial leverage. Second, under 3 different scenarios of changing tax rates (20%, 25% and 28%), we recognized that there is not large disperse in equity beta values, estimated at 0,714 for current leverage situation. Third, by changing tax rates in 3 scenarios (25%, 20% and 28%), we recognized both equity and asset beta mean values maintain the same values (0,682 and 0,414) with the current level of tax rate. Last but not least, this paper covers some ideas and policy suggestions. JEL classification numbers G00, G3, G30

Road tax interactions among local governments: a spatial panel data analysis of the French case over the period 1984–2000

ABSTRACTThis article contributes to the literature on local tax interactions. Its novelty lies in its focus on the interactions of local governments via an indirect local tax on vehicles such as the road tax sticker and its analysis of interactions between direct and indirect local taxation. The main purpose of this article is to provide an empirical analysis of the reaction of road tax policy in a given French ‘department’ to changes in road tax policy in other ‘departments’. The analysis uses a novel panel data set covering the 96 French metropolitan ‘departments’ for the period from 1984 to 2000. First, the results confirm the presence of significant spatial interactions between French ‘departments’ due to the road tax sticker. Second, the estimation results also show that the business tax rate and/or the property tax rate on developed land are complements to the road tax sticker, whereas the residence tax rate and/or the property tax rate on undeveloped land are substitutes to the road tax instrument. Finally, I find that ‘departments’ with a larger, younger and older population set higher rates for the road tax sticker. The results are robust regarding alternative weight matrices.

Chinese Women's Drinking Patterns Before and After the Hong Kong Alcohol Policy Changes.

To examine the patterns of alcohol consumption in Hong Kong Chinese women before and after a period of major alcohol policy amendments. This study compared alcohol consumption patterns in Hong Kong Chinese women before and after a period of major alcohol policy amendments and found increased drinking among certain subgroups, particularly middle-aged women. These increases are likely due to personal factors (e.g. changing perceptions) as well as environmental influences (e.g. greater marketing). Cross-sectional telephone surveys were conducted on adult Chinese women prior to the 2007-2008 beer and wine tax eliminations in 2006 (n = 4946) and in 2011 (n = 2439). Over the study period, only women in the 36-45 year age stratum reported significant increases in all three drinking patterns: past-year drinking (38.1-45.2%), past-month binge drinking (2.3-5.2%) and weekly drinking (4.0-7.3%) (P < 0.05); middle-aged women, unemployed or retired women and those ascribing to alcohol's health benefits emerged as new binge drinking risk groups. In 2011, 3.5% of all drinking-aged women (8.8% of past-year drinkers, 20.7% of binge drinkers and 23.1% of weekly drinkers) reported an increased drinking frequency after the tax policy changes. The main contexts of increased drinking were social events and with restaurant meals; moreover, beliefs of alcohol's health benefits were common to all contexts of increased drinking. Of women who increased their drinking frequency, the largest proportion attributed it to peer effects/social environment conducive to drinking, and brand marketing/advertising influences. Increased drinking among certain subgroups of Hong Kong Chinese women may be due to combined influences of: increased societal acceptance of social drinking, aggressive marketing promotions and personal beliefs in the health benefits of drinking that have recently emerged in the region. Hence, multi-prong strategies are required to combat potential drinking harms in these women.

Silicon Valley Venture Capitalist Confidence Indexx

Silicon Valley Venture Capitalist confidence in the Bay Area entrepreneurial environment rose in the final quarter of 2017. The upward change in direction of sentiment was levered to increasing amounts of available funding to support entrepreneurs working to introduce breakthrough technologies that aim to transform industries and change the trajectory of business. Macroeconomic metrics, particularly those tied to recent changes in corporate tax policy, also suggest a dynamic business environment where more corporate resources may be deployed to the development and acquisition of innovation. Record public stock market valuations also provide corporations a richer share currency to acquire innovation, thus providing additional exit opportunities and incentives for entrepreneurs and their venture capital backers.

Changing Tax Policy Impacts on the Risk Level of Viet Nam Wholesale and Retail Firms

Many financial markets including but not limit to, the emerging stock market in Viet Nam, have been affected by the financial crisis 2007-2009. This study analyzes the impacts of tax policy on market risk for the listed firms in the wholesale and retail industry during this period as it becomes necessary. First, by using quantitative and analytical methods to estimate asset and equity beta of total 9 listed companies in Viet Nam wholesale and retail industry with a proper traditional model, we found out that the beta values, in general, for many companies are acceptable. Second, under 3 different scenarios of changing tax rates (20%, 25% and 28%), we recognized that there is not large disperse in equity beta values, estimated at 0,646, 0,653 and 0,657.These values are much lower than those of the listed VN construction firms. Third, by changing tax rates in 3 scenarios (25%, 20% and 28%), we recognized both equity and asset beta mean values have positive relationship with the increasing levels of tax rate. Finally, this paper provides some outcomes that could provide companies and government more evidence in establishing their policies in governance.

Changing Tax Policy Impacts on the Risk Level of Viet Nam Wholesale and Retail Firms after the Global Crisis 2007-2011

Many financial markets including but not limit to, the emerging stock market in Viet Nam, have been affected by the financial crisis 2007-2011. This study analyzes the impacts of tax policy on market risk for the listed firms in the wholesale and retail industry during this period as it becomes necessary. First, by using quantitative and analytical methods to estimate asset and equity beta of total 9 listed companies in Viet Nam wholesale and retail industry with a proper traditional model, we found out that the beta values, in general, for many companies are acceptable.Second, under 3 different scenarios of changing tax rates (20%, 25% and 28%), we recognized that there is not large disperse in equity beta values, estimated at 0,646, 0,653 and 0,657.These values are much lower than those of the listed VN construction firms.Third, by changing tax rates in 3 scenarios (25%, 20% and 28%), we recognized both equity and asset beta mean values have positive relationship with the increasing levels of tax rate.Finally, this paper provides some outcomes that could provide companies and government more evidence in establishing their policies in governance.

Budgeting Rules and Program Outcomes

AbstractIt is not efficient for a budget system either to enable excessively frequent changes in programs and tax policies or to be rigid and unresponsive. Program durability is one measure of how a budget system weighs the competing goals of resoluteness and responsiveness. The federal budget has different processes—mandatory and discretionary spending and tax expenditures—each based in separate congressional committees and relying on separate procedures. This article examines the budget systems' durability. One finding is that mandatory spending programs and tax expenditures are more durable than programs backed by discretionary spending. However, while programs targeted to vulnerable populations and supporting long‐term planning, such as in income support and health, might benefit from durability, these programs display shorter durability, not longer. While displaying greater durability, tax expenditures do respond to changes in different economic sectors, based on the changes in spending of other budget systems.

Dynamic Scoring: An Assessment of Fiscal Closing Assumptions

Analysis of fiscal policy changes using general equilibrium models with forward-looking agents typically requires the modeler to assume a counterfactual adjustment to some fiscal instrument in order to achieve the debt sustainability implied by the government's intertemporal budget constraint. Since the fiscal instrument chosen to close the model can induce economic behavior unrelated to the policy change in models where Ricardian Equivalence does not hold, noise may be introduced into the analysis. In this paper we use such an overlapping generations framework to examine the impact of alternative fiscal closing assumptions on projected changes to economic aggregates over the ten-year 'budget window' following a change in tax policy, assessing the extent to which the noise associated with a particular fiscal instrument can be mitigated. We find that while quantitative differences in projected macroeconomic activity can be observed across alternative fiscal instruments, these differences tend to shrink as the date that fiscal instruments begin to adjust is delayed into the future. Since the particular fiscal instrument chosen to achieve debt sustainability can then become relatively unimportant, the reliability of policy analysis obtained using this class of models may be improved.

Ідентифікація та умови формування середнього класу в Україні з урахуванням світових соціальних трендів.

The criteria of identification of the middle class are determined, objective and subjective approaches of the middle class are considered. The main features of the Ukrainian middle class are considered, as well as factors that may contribute to the emergence of a significant middle class. The existing specifics in the state concerning norms on income, quality of housing and education level are explored. Dependence of income inequality in the studied countries was revealed, which allowed to assume that there is a significant influence of state institutions and politics on the formation of inequality. The deterrent factors of the formation and development of the middle class in Ukraine are determined. It has been found that the distribution of income within countries significantly affects the eradication of poverty on a global scale. Noted that the change in inequality of incomes and inequalities in property in the world requires significant changes in tax policy nationally and globally.It is substantiated that progressive taxation is an effective tool for combating inequality in income and property inequality.

Taxes and Peer Effects

ABSTRACTA growing literature examines how a firm's behavior impacts the behavior of its peers. In this paper, we examine how changes in tax paying, and the associated financial reporting, impact a firm's peers. Changes to tax paying and reporting behavior at other firms within a peer group can be affected by many of the same factors, such as industry-level tax policy changes or audit risk, so we make use of exogenous—to the peer firms—shocks to tax behavior. Following the methodology of Dyreng, Hanlon, and Maydew (2010), we estimate managerial tax avoidance fixed effects and use these to identify tax rate shocks associated with executive turnover. We find that peer firms respond to these shocks by changing their GAAP tax rates in the same direction. The magnitude of the effect corresponds to an approximately 10 percent response to the average change in peer group GAAP ETR. Our evidence suggests that these peer effects occur only for book (i.e., financial reporting), rather than cash (i.e., real effects), ETR and are concentrated in firms with potentially greater discretion in reporting taxes on foreign earnings.JEL Classifications: H25; M41.Data Availability: Data used in this study are available from public sources identified in the paper.

Tax Policy Measures in Advanced and Emerging Economies: A Novel Database

This paper describes a new, comprehensive database of tax policy measures in 23 advanced and emerging market economies over the last four decades. We extract this information from more than 900 OECD Economic Surveys and 37,000 tax-related news from the International Bureau of Fiscal Documentation using text-mining techniques. The innovation of this dataset lies in its granularity: changes in the rates and bases of personal and corporate income taxes, value added and sale taxes, social security contributions, excise, and property taxes are systematically documented. In addition, the database provides information on the announcement and implementation dates, whether the measures represent major changes, are part of a broader tax package, and phased in over several years. The paper also presents a range of stylized facts suggesting that information from this database is useful to deepen the analysis of tax policy changes for research and policy purposes.

Tax Policy Measures in Advanced and Emerging Economies: A Novel Database

This paper describes a new, comprehensive database of tax policy measures in 23 advanced and emerging market economies over the last four decades. We extract this information from more than 900 OECD Economic Surveys and 37,000 tax-related news from the International Bureau of Fiscal Documentation using text-mining techniques. The innovation of this dataset lies in its granularity: changes in the rates and bases of personal and corporate income taxes, value added and sale taxes, social security contributions, excise, and property taxes are systematically documented. In addition, the database provides information on the announcement and implementation dates, whether the measures represent major changes, are part of a broader tax package, and phased in over several years. The paper also presents a range of stylized facts suggesting that information from this database is useful to deepen the analysis of tax policy changes for research and policy purposes.

ДОСВІД ПОДАТКОВИХ РЕФОРМ У ПОЛЬЩІ ТА ГРУЗІЇ В КОНТЕКСТІ УДОСКОНАЛЕННЯ ПОДАТКОВОЇ ПОЛІТИКИ УКРАЇНИ

У статті проведено дослідження позитивного та негативного досвіду від впровадження податкових реформ у Польщі та Грузії в контексті наближення податкової системи України до стандартів Євросоюзу. Розглянуто основні положення податкових систем цих країн, шляхи лібералізації економіки та вдосконалення податкової політики. Окремо розглянуто спрощені системи оподаткування та їхні правові механізми. Проаналізовано та схематично зображено основні етапи формування податкової політики Польщі та результати змін податкової реформи Грузії. Запропоновано шляхи використання досвіду цих країн у процесі проведення податкових реформ в Україні. Обґрунтовано, що практичне втілення іноземного досвіду в Україні повинно здійснюватися виключно після ґрунтовного та всебічного вивчення проблеми на національному рівні.

Tax policy and housing prices: evidence from Vietnam using event study approach

This paper examines the effect of tax policy on housing prices in Vietnam for the period from October 2004 to September 2016 using event study approach. The authors find that all five key changes made to the personal income tax, corporate income tax and non-farm land use tax have caused the housing prices to decline on average 6-11% during the event window, but only the impact of the personal income tax changes is statistically significant. The fact that changes in housing prices are mostly seen prior to the effective date of the tax policy change implies that tax policy change indeed has influenced the housing prices in Vietnam. Although this research has not examined the mechanism through which tax policy has influenced the housing prices, the findings offer some implications for the government in terms of using tax policy for controlling housing prices in Vietnam. The research is also of very few papers in this literature that use the event study approach.